Monday, November 5, 2012



Adam M. Schenck
Copyright 1996, Adam M. Schenck



On August 24, 1995 amid a media blitz conducted to the sound of the Rolling Stones, software giant Microsoft released its much awaited operating system Windows951 . Sales of Windows95 topped $12 million in the first four months after its release2 . With first quarter sales like that it is no wonder that Bill Gates called in the FBI when he learned that some unknown person had uploaded a prerelease version of Windows96, yes 96, to a Usenet newsgroup named Alt.Binaries.Warez.IBM-PC3 .


A quick perusal of Alt.Binaries.Warez.IBM-PC (a.b.w) will show Windows96 is still available for downloading today. It will also turn up numerous other big ticket software packages available for free downloading4 . While current statistics are not available, it is believed that the vast majority of posts to newsgroups like a.b.w5 contain copyrighted material posted without the permission of the copyright owner6 . It is estimated that the Internet was used to transfer 27% of all software lost to piracy in 1993. This amounts to roughly $2 billion worth of computer software7 .


It is in this context that this document sets out to examine the liability of the Internet service provider (ISP) for copyright violations that occur through Usenet newsgroups like a.b.w.. Part I provides a brief overview of the Usenet, and copyright law. Part II will apply the theories of copyright infringement: direct, vicarious, and contributory, and case law in this area, to conclude that in some cases ISP's should be liable for copyright infringement for third party postings of copyrighted computer software..

Part I



Usenet can be described as a 'distributed bulletin board system' which news articles, or posts, are sent to and recieved from8 . Essentially it is comprised of numerous independent electronic bulletin board systems that communicate with one another through a common protocol9 . While Usenet is not the Internet, the Internet is used as the primary conduit to transfer articles, or posts, among the various hosts systems10. Articles are received by a Usenet host in two different ways: Uploads from local users; and via newsfeeds from other Usenet hosts. By transferring postings among various hosts an article can effectively transverse the world. Usenet transmissions differ from email, and World Wide Web transmission, in that each Usenet host not only transmits an article, it also retains a copy on its own hard drive.11


Current statistics put the daily Usenet traffic at close to one gigabyte per day12. In a 14 day period the number of postings is close to 2 million13 . To help make sense of this huge volume of information the Usenet is divided into a hierachical sets of newsgroups14 . While the process of sending and receiving posts is automated15 , there is no requirement that every host carry every newsgroup. Instead, each host chooses which of the more than 15,000 newsgroups will be made available to its local users16 .

Copyright and Computer Software.


Section 106 of the Copyright Act of 197617 grants a copyright owner the exclusive rights to reproduce18 , prepare derivative works19 , distribute20 , publicly perform21 , and publicly display22 his copyrighted work. In addition, the copyright owner is also granted the exclusive right to authorize another to reproduce, prepare derivative works, distribute, publicly perform, and publicly display his copyrighted work23 . .


While the question of whether a particular computer program is protected by copyright is determined on a case by case basis, that computer programs in general are afforded copyright protection is well established24 .


Section 501 of the Copyright Act of 1976 defines a copyright infringer as anyone who violates any of the exclusive rights of the copyright owner. Sections 502 through 505 provide the following civil remedies for copyright infringement: temporary, and final injunctions25 ; impounding and destruction of the infringing articles and the means of producing the articles26 ; actual damages and profits, or statutory damages27 ; and costs and attorney fees28 . .


To prevail in a suit for copyright infringement a plaintiff must show two things. First, that he is the owner of a valid copyright. Second, that there was 'copying' for which the defendant bears legal responsibility29 . For the discussion in part II it will be assumed in all cases that a valid copyright exists, that the Usenet post is an exact copy of the copyrighted computer software, and the act of uploading to, and downloading from a Usenet host results in the creation of a copy for copyright considerations30.

Part II


Courts considering the liability for copyright infringement have relied upon three different theory. Liability as a direct infringer, as a contributory infringer31 , and as a vicarious infringer32 of the copyrighted work. Each of these legal theories will be considered in turn in the discussion below..


For a plaintiff to prevail on a theory of direct infringement against an ISP it is necessary to prove that the ISP was directly involved in the actual copying of the computer software. A number of courts have found bulletin board operator's liable under a direct infringement theory for third party uploading and downloading of copyrighted materials. .


In Playboy Enterprises, Inc. v. Frena33 , defendant Frena, the operator of a BBS, was held liable for the direct infringement of Playboy's copyright in 170 adult photographs. Frena allowed subscribers to access his BBS for a fee, and to download photographs that other subscribers had uploaded to the BBS. Frena claimed that each of the 170 photographs were uploaded to his BBS by subscribers, and that he removed them as soon as he learned they were on his BBS. On these facts, the court found on summary judgment that Frena violated Playboy's exclusive right of distribution by allowing subscribers to uploaded and download Playboy's copyrighted photographs. While it is not a part of the court's finding that Frena had violated Playboy's right to distribution, it should be noted that the court went on to mention that Frena's name, and the BBS name and phone number were placed on the photographs34.


In Sega Enterprises Ltd. v. Maphia35 the MAPHIA BBS and its operators were held liable for the direct infringement of Sega's copyright in video game programs which were uploaded to the MAPHIA BBS by BBS subscribers. In discussing the liability for copyright infringement, the court noted that subscribers to the MAPHIA BBS were required to either pay a fee, or purchase equipment, to be allowed to download from the BBS, and that the defendant knew unauthorized copies of Sega's video game programs were being uploaded and downloaded from the BBS. Additionally the court noted that the defendant specifically solicited subscriber to uploaded copyrighted Sega video game programs for other subscribers to download. The court premised its finding of direct infringement on the defendants violation of Sega's exclusive right to reproduce its copyrighted video game programs, holding the uploading of the video game programs to the BBS by the BBS subscriber, done with the knowledge of the defendant established a prima facie case of direct copyright infringement.


Religious Technology Center v. Netcom On-Line Communication Services, Inc.36 reaches a very different conclusion on direct liability. The court concluded that neither a BBS, nor the ISP that routed the BBS's Usenet feed through the Internet were liable for the direct infringement of Religious Technology Center's (RTC) copyright in the writings of L. Ron Hubbard posted to the Usenet newsgroup Alt.Religion.Scientology (a.r.s) by a third party. In finding no liability for direct infringement the court considered the defendants to be mere possessor of computer equipment that automatically made incidental copies of third party postings. It noted that the defendants took no affirmative action that could be thought to directly result in copying of RTC's copyrighted materials other than setting up and maintaining the Usenet hosts. The forwarding and temporary storage of RTC's copyrighted materials were viewed as incidental to the real purpose of maintaining the Usenet site - to have a working system to transmit Usenet postings to and from the Internet. While not will to go so far as to classify the defendants as common carriers, the court is receptive and possibly influenced by the analogy37 . In many way the court seemed to be choosing between a free, and effective Usenet, and applying a theory of copyright protection that could have dramatic reprecussions to the continuation of the Usenet..


In applying these cases to the question of the liability for direct infringement of a Usenet host for third party posts to newsgroups like a.b.w. it is difficult to come up with a clear case either for or against liability. At first RTC would seem to indicate that there would be no liability for direct infringement, but a careful analysis of the differences between the two cases suggests that this might not be so..


The RTC court made specific note of a number of factors which need to be examined closer. First the postings in RTC were to a Usenet newsgroup devoted to the discussion of the religion Scientology38 . While it is not unheard of for there to be claims of copyright violation in the postings to this group39 , a browsing of the group suggests that many of the postings do not contain copyrighted materials, or do have a colorable fair use argument. A.B.W. on the other hand is devoted the pirating of software40 . It has been suggested that the majority of the more than 1.3 gigabytes of posts to a.b.w. each month contain copyrighted material41 . While the defendants in RTC could hardly be said to know when or even if any third party might choose to post copyrighted material to a.r.s. again, the same could not be said of an ISP defending a suit for postings to a.b.w. .


The RTC court suggests that RTC was pursuing the wrong party in its suit42 . The court notes that the identity of the third party who originated the postings to a.r.s. was known to RTC, and is reluctant to liability to the defendants while the original poster is available. In posts of copyrighted computer software to a.b.w. it is unlikely that the identity of the poster will be known to anyone other then the poster. Through the use of anonymous remailers it is almost impossible to determine who is originating a post.43 .


A related although somewhat different point is that in discussing the automatic nature of the operation of Usenet sites, the RTC court fails to discuss a very important aspect of running a Usenet host that very much does require human interaction44 . That is the initial choosing of which newsgroups a Usenet host will carry, as well as the continuing choice of which newsgroups to keep and which to stop carrying..


Under Sega and Playboy it seems that an ISP could be held liable as a direct infringer of either the exclusive right of reproduction, or distribution for the receipt, storage, and subsequent transmission of copyrighted materials. It remains to be seen whether future courts will choose to follow this model of strict liability, or opt for the more active involvement approach of RTC. .


An ISP's liability for contributory infringement hinges on the relationship between the direct infringement and the ISP45 . Finding an ISP liable for contributory infringement requires two showings. First the ISP must know, or reasonably should have known of the infringing activity. Second the ISP must induce, cause or materially contribute to the infringing activity.46 .


The Sega court addressing the issue of contributory infringement held that it was not necessary for the defendant to know exactly when a third party would upload or download a Sega video game program. It was sufficient that the defendants knew that copyrighted works were being uploaded and downloaded from the MAPHIA BBS. This taken with the provision of facilities, direction and encouragement of the third party infringer established a prima facie case of contributory infringement.47 .


Likewise the RTC court in denying the defendants motions for summary judgment and judgment on the pleadings suggested that a case of liability for contributory infringement could be made. The court indicated that knowledge of the infringement could be premised on RTC's request that defendants remove the third party post because it infringed RTC's copyright. The court also recognizes that by providing a service that allowed for the worldwide distribution of RTC's copyrighted material, and defendants' maintainance of control over their Usenet hosts raised material issues of fact as to whether the defendants substantially contributed to the third party infringement..


It would seem that a strong case for contributory liability can be made where an ISP has actual, or constructive knowledge of the infringing nature of Usenet posts stored on its hard drive..


An ISP's liability for vicarious infringement hinges on the relationship between the direct infringer and the ISP. Finding an ISP liable for vicarious infringement requires two showings. First the ISP must have the right and ability to control the infringer's acts. Second the ISP must receive a direct financial benefit from the infringement.48 .


The RTC court held that the defendants were not liable for vicarious infringement of RTC's copyrighted materials. The court found that while there was a genuine issue of material fact as to whether the defendants' could exercise control over the the third party infringer's acts, due to the defendants' fixed fee structure for Usenet access a direct benefit from the infringing posts could not be established.

While the RTC court dismisses RTC's argument that the defendants receive a direct benefit by attracting copyright infringers to its system it specifically notes that there was a lack of probative evidence for the claim. Although economic theory suggests that there would be direct benefit to an ISP because users will be willing to pay more for a service that provides free access to copyrighted work49 , and that an ISP that provides access to free copyrighted material will attract more users50 , it appears that without the factual support to back up this hypothesis there will be no finding of a direct benefit, and therefore no vicarious liability.
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